NOTE 4 – DEVELOPMENT LOANS RECEIVABLE

Development Loans

Historically, we provided first mortgage and mezzanine loans to hotel developers, These loans were initially originated as part of our acquisition strategy. During the three and nine months ended September 30, 2013, no such loans were originated by us. Interest income from development loans was $0 and $463 and $158 and $1,602 for the three and nine months ended September 30, 2013 and 2012, respectively. Accrued interest on our development loans receivable was $0 as of September 30, 2013 and $348 as of December 31, 2012.

As of September 30, 2013 we had no development loans outstanding and as of December 31, 2012, our development loans receivable consisted of the following:



Hotel Property	Borrower		Principal Outstanding September 30, 2013		Principal Outstanding December 31, 2012	Interest Rate		Maturity Date
Operational Hotels
Hyatt 48Lex - New York, NY*	44 Lexington Holding, LLC	$	-	$	15,122	9%	⁽¹⁾	N/A

Construction Hotels
Hyatt Union Square - New York, NY ⁽²⁾	Risingsam Union Square, LLC		-		13,303	10%		N/A

Total Development Loans Receivable		$	-	$	28,425

*Indicates borrower is a related party

(1)Prior to June 1, 2012, the development loan to 44 Lexington Holding LLC allowed the borrower to elect, quarterly, to pay accrued interest in-kind by adding the accrued interest to the principal balance of the loan. Effective June 1, 2012, we amended the development loan with 44 Lexington Holding LLC to cease the buyer’s election to pay accrued interest in-kind. Interest of $678 was added to principal during the nine months ended September 30, 2012.

(2)On April 9, 2013, we completed the acquisition of the real property and improvements for the Hyatt Union Square hotel in New York, NY from Risingsam Union Square, LLC. Consideration given in exchange for the property including $36,000 paid in cash to the seller and ourcancellationof a development loan receivable in the original principal amount of $10,000 and $3,303 of accrued interest on the loan. In addition, we paid off the existing construction financing and entered into a new mortgage loan. See “Note 2 –Investment In Hotel Properties” for additional discussion of this transaction.